How generous of Ed Balls to publish a transcript of his interview on the Politics Show earlier, so that we can amble through it on a Sunday evening. It contains, as you’d expect, more
disagreeable parts than agreeable, and nothing more so than his comments about the national debt, deficit and all that. Two of his arguments, in particular, are worth alighting on because they’re
Brownies in the classic mould, and will probably be served up again and again:
1) ‘After the Second World War we took a number of years to repay our much higher level of debt. The government and Vince Cable have tried to get this done in one
Parliament and it is backfiring.’ Here, Balls is right on two counts: measured as a percentage of GDP, we did have a much higher level of debt in 1945, and it did take decades to repay. But, beyond that, the rest of his point is utterly misleading. Why? Because today’s government isn’t doing what
any normal person would understand as ‘repaying’ the national debt over one Parliament. On current figures — whether it’s real terms, cash terms or as a percentage of GDP —
debt will be higher in 2015-16 than it is today. In
fact, the IFS reckons that it will still take a couple of decades for us to
return to pre-crash levels of around 40 per cent of GDP.
If anything, the country’s debt profile is fairly similar now to how it was after the second world war, putting aside the clear difference in scale. As a percentage of GDP, debt started falling
from its post-WW2 peak around three years after the end of the conflict. Now, debt is forecast to start falling from a peak of 70.9 per in 2013-14 — around, erm, three years into this
Parliament. If Balls wanted to make George Osborne seem like a radical nutjob in comparison to our postwar politicians, then he might have picked a more convincing example.
2) ‘[The government’s approach is] leading to higher borrowing as well as flatlining growth.’ Okay, Balls can have the flatlining growth, not least because it provokes
him into those ‘increasingly maniacal gesticulations’ at PMQs. But higher borrowing? According to the Office for Budget Responsibility, borrowing will fall every year of this
Parliament, however it’s measured. For instance, as a percentage of GDP, public sector net borrowing is forecast to stand at 1.5 per cent in 2015-16, compared to 9.9 per cent last year.
What Balls actually means — although, for some reason, he now prefers to use the shorthand ‘higher borrowing’ — is that the government’s borrowing forecasts have gone up
from those made last year, even though borrowing is going down overall. Being specific about it, the government is expecting to borrow about £46 billion more over this Parliament than it
anticipated last year, largely due to slower growth. But, like I say, borrowing will still be going down overall.
It’s a shame that Balls is trying to make this subtler point stand for something else — because it’s concerning enough in the first place. If growth keeps on slumping, then it is going to be more and more
difficult for the government to keep the public finances from swelling out of shape. That could, in theory, result in genuinely higher borrowing in future. But not yet — whatever Balls
UPDATE: And Ed Balls replies on Twitter…